Ari Weitzman (18:00)
Thanks Audrey. That's it for what the left and right are saying. Which brings me to my take. There's no way around it. This is a very bad jobs report. The U.S. economy lost 92,000 jobs in February. Unemployment ticked up to 4.4% its 13th consecutive month above the 4% threshold. Figures for January and December were revised downward by a combined 69,000. Meanwhile, the latest CPI, which measures inflation, was up 2.4% over the last 12 months, even as the Fed continues to chase its elusive post pandemic 2% benchmark. And all the while, consumer sentiment, even after four straight months of improvement, remains well below where it was a year ago. Extrapolating from whole data, it's relatively easy to forecast gloom on the horizon for the US Economy. The lack of optimism from the usual pro Trump pundits following this report speaks as loudly as the almost gleeful descriptions of just how bad Trump's promised golden age has been from the president's usual critics. The negative case for the economy is relatively easy to make, and it looks like this going back to Joe Biden's presidency, economic sentiment has been low. A lot of that was driven by inflation, as well as concerning personal financial metrics like the high cost of gasoline and low rate of personal savings. After some improvement at the end of Biden's term and the beginning of Trump's, gasoline is once again high while personal savings are going back down. Trump's deportation agenda is driving out low wage employees, which we can see in the lethargic agriculture and hospitality industries. And since healthcare has been the only reliably strong sector, the economy is in a tenuous position. One large strike could and did send our numbers back and cause ripple effects that can't be absorbed elsewhere. Two more disruptions are poised to deliver a twin coup de gras to our economy. Tariffs and War in theory, if tariffs were working, investment in manufacturing would increase along with federal revenues to displace fired federal workers. That investment would take time, at least a year, to show up in jobs reports. Instead, February's numbers are the worst sign yet for that theory. 11,000 jobs were lost from transportation and warehousing, and 12,000 were lost from manufacturing. We could be getting the worst of all worlds. Manufacturing continues to pose losses. Federal employees are losing their jobs. Revenue from tariffs is flatlining and will likely have to be repaid. And yet the federal budget expands. Today's economic environment is one of disruption and uncertainty, which will discourage investors from building in America and reduce the likelihood of those manufacturing jobs coming in future reports. The jobs numbers bear that out. And there's no end to this policy of disruptive or theoretical tariffs in sight. Even though the Supreme Court recently found Trump's reciprocal tariffs to be unconstitutional, the president responded by announcing more tariffs under different authority. Many of us were bracing for the impact of tariffs to come as a traumatic thud. Instead, it's been a weight around the ankles of the economy, constantly slowing progress. Meanwhile, the war in Iran is causing the price of crude oil to spike. If the war continues and it doesn't show any sign of stopping, those prices will remain high. And remember, high crude oil prices mean much more than just high gas prices. Oil is the price of economic agency. More expensive oil means higher shipping costs and higher manufacturing costs, along with higher commercial travel. If tariffs are our weight around the ankles, then oil prices are another around the neck and there's only so much weight we can take. And that's the negative case. But if I were to make the positive case, it would look like this. We should be careful not to read too much into one report. For one thing, the decrease from January to February coincided with bad weather. When the weather's bad, we'd expect to see job site cancellations that impact exactly the industries that showed signs of struggle. Second, the job losses in healthcare may actually signal some job gains when you account for the now concluded 31,000 person strike at Kaiser Permanente. Not only were those losses temporary and they will show up as growth in the next report, but striking workers are a sign of a labor force with leverage. This temporary disruption ended as a net positive for workers in this industry, producing a deal for better salaries and better benefits. Lastly, as I wrote the last time we covered jobs data, the Bureau of Labor Statistics has quietly improved its predictive model, so we should expect these numbers not to face as much of a dreaded downward revision as past reports numbers have. And as an aside, January was revised downward by only 4,000 jobs and it's entirely possible these figures get revised upward in next month's report. When you zoom out even further, you can see a job market starting to stabilize. Not only are hourly wages and inflation moving in the right direction, but job losses are starting to flatten out. As Robert Armstrong wrote in the Financial Times, as a measure of cyclical activity in the job market, we like to look at private employment without health care and social assistance. On that front, you can see an improving trend towards less job losses in the six month rolling average, but you have to squint a bit. Furthermore, hourly wages are continuing their post pandemic rate of increase. Put differently, wage growth is outpacing inflation and it has been for the past two years. On top of that, if you are particularly bullish on artificial intelligence, you could even see productivity gains from AI in the latest jobs numbers. All in all, the labor market may be bearing some strain, but it has some legs and is getting stronger. So is the February report a signal of a strong jobs market or a weak one? Saying this doesn't take a lot of skill as a media analyst, but you can easily look at these negative and positive cases and say that both are true. The labor market is lopsided towards a few industries and tariffs and war are going to seriously drag down our economy. All things you can criticize Trump for. But wage growth remains high, business investment is healthy, and our metrics are improving. All things that you can credit Trump for. February's report is the starkest sign of the negative impacts of Trump's policy so far. But beneath the most recent developments is a stable economy. Or to quote Armstrong again, we have a pretty good understanding of why we are in a sluggish job market Covid hangover, bad trade policy, immigration control, and why the economy is growing high business investment, strong household balance sheets supporting consumption. I hesitate to make economic predictions because I am not an economist, and even if I were, that's a great way to look like a fool. But in the interest of accountability, I'll go out on a limb here and say that I don't see even this objectively bad report as a sign of an imminent recession. I've heard and I've written about the fears of a coming recession since the earliest rumors of a highly contagious virus spreading in China. Yet here we are on year six of asking when the other shoe is going to drop. Maybe a prolonged war will provide the final straw to break the camel's back. The longer the strait of Hermes is choked, the likelier that is. But until that weight starts to really buckle the labor market, I'm going to continue to believe that it won't. That's it for my take today, but our executive editor Isaac Saul has a dissent. He's traveling right now, so I'm going to read his dissent to my argument for him. Here's what Isaac had to say. I appreciate Ari's two pronged look at the optimistic and pessimistic cases for the economy after this jobs report, but I think that framework emits one crucial element Trump's culpability. Ari says he can criticize Trump for tariffs and war, but he can also credit him for wage growth, remaining high, business investment, and standard economic metrics improving. To me, Trump is much more directly responsible for tariffs and war than he is for wage growth, investment or standard economic measures improving, which are always hard to tie to a president's policies early on in a term. Even as someone who has urged patience on tariffs, I think this administration's policies are much more visible in the negative case on the economy so far than they are in the positive, which feels central to this discussion.
